Stories I’d like to see

Ad technolology that may threaten newspapers; winners and losers of the fiscal cliff

In his weekly “Stories I’d like to see” column, journalist and entrepreneur Steven Brill spotlights topics that, in his opinion, have received insufficient media attention. This article was originally published on Reuters.com.

1. Another threat to newspapers’ business models?

This article in The New York Times last Friday and this one in the National Journal pinpoint two important developments in the media business that could collide to pose yet another threat to the financial viability of journalism.

The Times article describes the rise of “programmatic advertising,” in which new online tracking technologies allow an advertiser to follow a consumer whose profile fits the advertiser’s targeted demographics wherever the consumer goes online rather than just make an educated guess about the websites that consumer is most likely to visit.

Before programmatic advertising, if an upscale restaurant chain decided that its best prospects were well-to-do men who live in major metropolitan areas and travel a lot, it might buy ads in the business sections of high-end newspapers or on business travel sites. Now the restaurant chain can follow those targeted people to any website they visit. It doesn’t have to buy ads on the sites where the target is most likely to be found but can instead simply bid on an electronic ad exchange to buy the cheapest ad that will reach someone with those demographics no matter where he or she goes (a gossip site, for example).

This erodes the premium upscale newspaper sites can charge. The individual consumer is what’s important and now identifiable, not the place where he sees the ad.

Thus, the Times reports in this article, “The shift is punishing traditional online publishers,” and that online advertising revenue at its own newspaper actually fell 2.2 percent in the last quarter as a result of a decline in the rates the Times is able to charge for Web advertising. That’s a trend reflected lately in the results of most other major newspapers.

In other words, on the heels of the Internet having destroyed the readership and advertising revenue of printed newspapers, further advances in digital technology now threaten the papers’ digital ad business.

The National Journal article is one of many reports lately covering the Federal Trade Commission’s renewed consideration of whether to regulate the use of cookies installed on websites. Cookies enable the kind of tracking on the Web that allows consumers to be labeled and targeted based on their interests, while also allowing websites or search engines like Google to deliver content — and ads — tailored to what the cookies tell them are the readers’ preferences.

The principal FTC issue being debated is whether and how to change the current voluntary method of regulating websites’ cookie tracking. As things stand, sites post privacy policies describing the tracking they do, then allow consumers to choose to opt out of being tracked. Privacy advocates have been pushing for rules — already seemingly headed for adoption in Europe — that would flip the process and require websites to get the affirmative permission of visitors before they can be tracked.

This deserves lots more coverage. It has been generally assumed that tighter regulation of cookies of the type being pushed on the FTC by privacy advocates would hurt all advertiser-supported websites, including those of newspaper publishers. But in light of the Times article about programmatic advertising, would a curtailing of fine-grained tracking actually help content-centric websites, particularly those of upscale newspapers, because advertisers would once again have to choose a place to advertise rather than target a person to advertise to? Or, have I got it wrong — and do the content websites still benefit so much from supplying tracking data to advertisers that they, too, will fight cookie regulation?

Beyond that, with major American companies such as Google and Facebook totally dependent on tracking, what would be the economic impact of crippling their ability to track en masse? How much of our economy, not to mention balance of trade, is based on a tracking economy that depends on the masses not opting out?

Who’s doing the lobbying on which side of the cookie issue? Are cookie-less advertising businesses, like print magazine and newspaper publishers and television and radio broadcasters, joining with the privacy advocates?

And how do those opposing tighter regulation rationalize an argument that it is bad public policy to give consumers a clearer choice?

Last year, Internet industry giants like Google and Facebook ignited and benefited from a popular uprising on the Internet that enabled the industry to beat back regulations aimed at making websites more responsible for piracy of copyrighted material. But might the Internet grassroots turn against the industry on the issue of whether consumers are entitled to a clearer choice about whether to be tracked so their data can be sold?

2. The K Street fiscal cliff war rooms:

It now seems clear that there will be some sort of deal to avert the fiscal cliff. It will probably start with a general agreement in principle: To raise revenue, tax rates will go up a bit for the wealthiest and loopholes will be curtailed, while outlays will be reduced through expense cuts to Medicare and Medicaid as well as other programs.

That’s when the reporting will have to shift from speculation about the negotiation to pinning down who’s doing what and why.

Editors and TV news producers trying to figure that out should be pushing reporters to get as much as they can from inside the war rooms set up for occasions like this by lobbyists up and down K Street. What are the lobbyists’ clients — be they oil producers, hospitals, teachers unions or defense contractors — most focused on and why?

Sure, we know the AARP is going to fight cutbacks in Medicare and will rely on its usual allies among Democratic liberals. But what about the finer details that are K Street’s bread and butter? Are hospitals worried about changes in Medicare penalties for outlier infection rates or patient readmissions, both of which could be levied under the guise of Medicare savings? Is the urologists’ lobby (yes, there is one) worried about changes in Medicare reimbursement policies for prostate cancer tests whose efficacy has lately been called into question? Are the CT and MRI medical imaging companies, like General Electric, gearing up to fight Medicare savings derived from possible restrictions on the cost and use of their equipment?

Is there some obscure language in the tax code that the oil industry wants to preserve even if killing some broader oil tax loophole has been advertised as part of the deal?

Which contract is which defense contractor most worried could be collateral damage when the i’s are dotted and the t’s are crossed in any provision for defense cuts?

The headlines will probably say that the “carried interest” loophole — the one that allows partners at private equity firms to be taxed on their pay as if it is a capital gain on investment income even though they haven’t invested anything — has been eliminated. But are there lobbyists working on some language that would open up another loophole?

For serious journalists, the real work of covering the fiscal cliff begins after the deal is announced.

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Steven Brill , the author of Class Warfare: Inside the Fight To Fix America’s Schools, has written for magazines including New York, The New Yorker, Time, Harper's, and The New York Times Magazine. He founded and ran Court TV, The American Lawyer magazine, ten regional legal newspapers, and Brill's Content magazine. He also teaches journalism at Yale, where he founded the Yale Journalism Initiative.

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